Interest rates:
Ok, I'm no guru about this stuff, but here's my take...
Any idea how long the interest rate effect lasts?
I think this depends on the next CPI numbers. The US
market had priced in a 25 point cut when it was at 10500.
It rallied and backed off a bit. I think we're now in
a trading range between 10500 and 11000 until the next
CPI report. If they decide to tighten by 25 points then
we'll be blowing through 10500 in no time. Conversely, with a
mild CPI the market will rocket right through 11000.
Quite honestly, this is a difficult market to follow given
the lack of volume. It feels like no-man's land out there.
The liquidity just sucks right now.
Do you know what interest rate is likely to have a severe
impact on dividend paying stocks? A stock paying 5.6% is, in
Canada, at least, is as good as a bond paying 7%+. Is there
a point where interest rate moves will overwhelm potential value?
Mmmm. Got me on that one. I have no idea how to answer you.
I mean, I'm sure there is, but at what level I'm not sure.
Maybe someone else can provide their view. That bond yield
of 6% sure puts the brakes on the market though.
...if the Fed is really planning three rate hikes between now
and Dec. 31, we'll have to take their potential effect into account.
Well...I think the reason so much focus is on the next CPI report
is simply because a higher CPI would give solid evidence of a
change in the trend of inflation. The US Fed would tighten on this
news and immediately the market would start to price in further
tightening, perhaps another 50 points. If tightening of 25 points
yields a drop in the DJIA from 11000 to 10500, then perhaps you
could imagine a drop of another 1000 in the DJIA. That would
bring us to 9500, a major support level. But hey, this is just
some speculating. Take it for what it's worth.
I do know that the next CPI report will be WIDELY watched.
There is no way in hell I'm going to have any position before
its release. The odds are no better than a coin toss. I'll wait
to trade on the news.
Bulls choose to believe that May's CPI was simply an anomaly.
Bears are hoping for a repeat performance on the CPI.
Simply put, this is a market on hold right now because each
has a valid viewpoint.
Sorry I can't give any real insight here. Like I said, I'm no
market guru. I just enjoy speculating like everyone else here.
WN |
